June 12, 2019 / 8:04 PM / 7 days ago

Shell hopes Argentina's hydrocarbon exports tax will expire next year

FILE PHOTO: Staff members work at the booth of Royal Dutch Shell at Gastech, the world's biggest expo for the gas industry, in Chiba, Japan, April 4, 2017. REUTERS/Toru Hanai

NEUQUEN, Argentina (Reuters) - Royal Dutch Shell PLC hopes a tax on hydrocarbon exports from Argentina will expire by the end of 2020 to help lower production costs in the nation’s promising Vaca Muerta shale play, a company executive said on Wednesday.

Currently, drilling costs at wells in Vaca Muerta, a Belgium-sized region in Argentina’s Neuquen province, are around 20% higher than comparable U.S. shale projects, Sean Rooney, the general manager of Shell Argentina, told Reuters in an interview.

“Something that weighs heavily on the development of the oil industry here is the export tax,” he said. “The export tax is set to expire in 2020, and we hope that they let it expire because it makes (production in Argentina) less competitive.”

Shell currently has three massive gas and oil projects under development in Vaca Muerta, which could have the largest natural gas reserves in the world.

Last year, the government of center-right President Mauricio Macri established a 5% export tax on hydrocarbons to boost government revenue as part of a financing deal with the International Monetary Fund.

The Vaca Muerta shale play is still in the initial stages of development. At the beginning of June, state energy firm YPF SA exported the first shipment of liquefied natural gas from the formation, and Exxon Mobil Corp said it was going ahead with a project that could produce 55,000 barrels of oil equivalent per day within five years.

Reporting by Eliana Raszewski; Writing by Gram Slattery; Editing by Tom Brown

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